IT Sector and Jio Platforms IPO trigger late FPI flow recovery in Oct-26

IT Sector and Jio Platforms IPO trigger late FPI flow recovery in Oct-26

FPIs SELL INDIAN EQUITIES WORTH $(3.67) BILLION IN OCT-26Prima facie, October and September look similar. In September, FPIs were net sellers to the tune of $(3.73) billion and in October, they net sold $(3.67) billion. Behind these numbers, there is the story of a late FPI recovery in October 2026. Out of 23 sectors tracked by NSDL, 17 sectors saw net selling, and only 6 sectors saw net buying.

Net selling was dominated by FMCG, BFSI, Auto, and Healthcare; while IT and Telecom saw focused buying. The advance/decline ratio of sectors (6:17) shows that the caution in the markets has only increased over September. First half of October saw net selling of $(5.05) billion, while second half of October saw net buying of $1.38 billion.

SectoralClassificationFPI Flows($ Million)SectoralClassificationFPI Flows($ Million)FMCG Sector-1,024Chemicals-87Financial Services (BFSI)-1,001Construction Materials-80Automobile & Components-802Forest Materials-11Healthcare-584Textiles-8Capital Goods-496Utilities-7Oil & Gas-489Diversified3Metals & Mining-483Others24Consumer Services-273Media, Entertainment42Power-262Services97Construction-183Telecommunication749Realty-107Information Technology (IT)1,418Consumer Durables-104Grand Total-3,667Data Source: NSDL

WHAT TRIGGERED THE FPI SELLING IN OCTOBER 2026?

Since the peak of Sep-24, FPIs have net sold $(84.53) billion in secondary equities and invested in IPOs worth $22.29 billion. Between Sep-24 and Oct-26, the FPI equity AUC fell by -26.4% from $931 billion to $685 billion. Overall FPI AUC (including debt) fell by -24.0% from $1,007 billion to $765 billion in this period.

Valuations continue to be a concern for global investors, as FPI selling has been offset by DFI buying. The Buffett indicator at around 125% is still too steep. However, in the short-term, the contra-AI trade may keep FPIs interested in Indian IT stocks.

With the RBI having raised rates by 25 basis points, there are expectations of another 25-bps rate hike in December to combat sticky inflation. With Rabi sowing nearly 43% below last year, it does raise the risk of food inflation spiking in coming months.FPIs also have concerns over India macros. IMF projects India’s debt/GDP ratio at a steep 83.5%. Fiscal deficit target of 4.3% leaves limited room for government to boost spending. The goods trade deficit is not great news for the CAD in FY27. Above all, there are concerns that higher inflation could dent real GDP growth in FY27.SECTORAL COLOUR OF FPI FLOWS IN OCTOBER 2026While FPI selling continued to be fairly widespread, the two sectors that saved the day for FPI flows were IT and telecom.

Despite net selling of $(3.67) billion in October, the real swing was in the sectors that got inflows. IT sector benefited substantially from the contra-AI trade; getting inflows of $1.42 billion. Higher yields also pose a threat for the $700 billion of AI debt.

The other sector that saw sharp net inflows in October 2026 was telecom at $749 million; with $1.16 billion buying in the second half of the month. This was more of one-time buying as FPIs rushed to invest in the IPO of Jio Platforms.

On the sell side, FMCG led the way with net selling of $(1.03) billion in October. FMCG selling has been triggered by input cost pressure on FMCG companies, impact of the crisis in West Asia, rising crude prices, and weak rural demand this year.BFSI, once again, saw net selling of $(1.01) billion in October. The sharply higher bond yields and risk of higher rates pushed FPIs to sell banks and NBFCs. There was also selling in insurance stocks after the IRDAI proposal on streamlining commissions.

Auto and Healthcare saw net selling of $(802) million and $(584) million respectively. Auto selling was dampened by weak tractor sales and tepid demand for entry level cars. In the case of healthcare, the selling was more in the traditional frontline outsourcing plays, while FPIs continued to prefer selected CDMO stocks.

Capital goods, Oil & Gas, and Metals & Mining saw combined selling of $(1.47) billion between them. Capital goods stocks are reacting to slowing capex in India. Oil & Gas plays are seeing compression in GRMs and marketing margins amid rising freight and insurance costs. Metals & Mining are seeing unwinding after a stellar rally.

Here is the overall picture. Gross FPI selling in October was $(6.0) billion, and gross FPI buying was $2.3 billion. Incidentally; both the buy-side stories of IT and Telecom do not have a sustainable narrative. Probably, a cessation of hostilities in the Gulf should help.